Our markets and the Christmas spirit

It is that unmistakeable time of year when every single shopping centre reminds us with flashing Christmas lights and beautifully festive decorations, that Christmas is just around the corner. And with all the hype surrounding the festive season, it’s difficult not to get carried away yourself, because it is, after all, most people’s favourite time of year.

People are always looking for reasons why the market moves up or down, but so many of them overlook the holiday spirit.

When we take a look at the FTSE/JSE All Share Index’s performance, only 18 (or 38%) of all Decembers over the last 50 years have ended on a negative note. Since October 1968, it has grown by 12% per year (excluding dividends) and more than a quarter of this growth was achieved during Decembers alone.

Of course, not unlike any other historical figures, “December holiday” figures carry no guarantees for future performance. In addition to that, the investment environment we currently find ourselves in, with political turmoil in South Africa, Brexit and the sharp decline in global markets, it’s going to be quite a challenge to end this year in the stock market on a positive note.

All I know, is that Christmas is fast approaching, and despite the fact that the FTSE/JSE All Share Index was still negative by 11% at the time of writing (21 November 2018), I’m definitely not going to risk guessing that the market will close on a negative note this December.

As positive as historical data regarding Decembers over the last 50 years may have been, when I viewed each month in isolation, it was quite interesting to note that over a 12-month rolling period (i.e. from one December until the next), it was also the worst performing of all the months, despite being positive 62% of the time.

If you had bought shares every June, your rolling 12-month returns would have been the best. May, the month during which most stockbrokers get the most instructions to sell, performed second best over a rolling 12-month period.

From a statistical viewpoint, Decembers do appear to be positive most of the time and I wouldn’t want to declare the market’s recent decline a trend that is likely to flow into next month.

The fact remains that we still find ourselves in an extremely high-risk investment environment and those risks cannot be ignored. Aside from the negative market growth this past year, when you take a step back, things look even worse when we look at the last five years’ data. Up to the end of October 2018, the FTSE/JSE All Share Index performed worse than money market over the last five years, which shows us just how challenging our current market environment is.

Personally however, I see more and more value emerging in our local market and I do believe that a turnaround can take place at any moment. In the meantime, be safe and prepared, because Christmas is just around the corner.

The opinions expressed in this blog are the opinions of the writer and not necessarily those of PSG. These opinions do not constitute advice. This is intended as general information and does not form part of any financial, tax, legal or investment related advice. Although the utmost care has been taken in the research and preparation of this blog, no responsibility can be taken for actions taken based on the information contained in this blog. Since individual needs and risk profiles differ, it is always advisable to consult a qualified financial adviser before taking action

As Portfolio Manager at PSG Wealth Old Oak and with over 20 years’ experience in the investment industry, Schalk has consistently delivered solid returns to his clients and has certainly become one of South Africa’s most well-known strategists. He started his career in 1994 at the stockbroking company, Huysamer Stals (later ABN Amro). He joined SMK Securities in 1997, (later became BoE Personal Stockbrokers) and was later appointed as director and branch manager. In 2001 he co-founded Contego Asset Management and managed the company as CEO up to March 2014, after which he joined PSG Wealth Old Oak. Schalk has also become a regular household name with investors, with his reports being published in many of the national press. He completed his MBA in 2008.

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